A Company Uses Perpetual Inventory in Connection with the Specific-Identification $$\begin{array} { | l | r | r | } \hline \text { Inventory } & 14,400 & \\\hline \text { Cost of goods sold } & & 14,400 \\\hline\end{array}$$

question 121

Multiple Choice

A company uses perpetual inventory in connection with the specific-identification method.The company purchased 30 industrial diamonds for $500 per unit.Later in the month,they purchased another 20 diamonds from another supplier for $480 per unit.On the last day of the month,they sold 18 diamonds to a customer at a price of $800 per unit.Of the 18 diamonds,3 came from the first batch and the remainder came from the second batch.
-Which of the following journal entries correctly records the Cost of goods sold?

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Inventory } & 14,400 & \\
• \hline \text { Cost of goods sold } & & 14,400 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | r | r | }
• \hline \text { Sales revenue } & 14,400 & \\
• \hline \text { Inventory } & & 14,400 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Cost of goods sold } & 8,700 & \\
• \hline \text { Sales revenue } & & 8,700 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Cost of goods sold } & 8,700 & \\
• \hline \text { Inventory } & & 8,700 \\
• \hline
• \end{array}\]

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Definitions:

Optimal Credit Policy

The credit terms that balance the costs and benefits to the firm, maximizing profitability while minimizing risk.

Accounts Receivable Period

The average number of days it takes a company to collect payments owed by its customers, indicating the efficiency of a company's credit and collections policies.

EOQ Model

Economic Order Quantity Model, a formula used by businesses to determine the optimal quantity to order that minimizes total inventory costs.

Optimal Order Size

The quantity of stock that minimizes both ordering and holding costs in inventory management, often determined by the Economic Order Quantity model.